A federal
judge has ordered Stephen Ehrlich to pay $750,000 to defrauded customers
of Voyager Digital, the cryptocurrency lending platform he once led before
its spectacular collapse.
The consent
order, entered yesterday (Monday) in Manhattan federal court, settles
fraud charges the Commodity Futures Trading Commission (CFTC ) brought
against Ehrlich in October 2023. The former CEO must funnel the money
directly to Voyager customers through the company’s ongoing bankruptcy
liquidation.
Beyond the
financial penalty, Ehrlich faces a comprehensive three-year ban from
commodity trading activities. The restrictions block him from trading on
registered exchanges, managing accounts containing commodity interests, or
working for firms requiring CFTC registration.
The order
also permanently bars Ehrlich from violating anti-fraud provisions
of the Commodity Exchange Act. He neither admitted nor denied wrongdoing
as part of the settlement.
“This
resolution once again highlights the CFTC’s important role in the
digital asset space,” said Charles Marvine, acting chief of the Division
of Enforcement’s Retail Fraud and General Enforcement Task Force.
“Compensating victims and limiting a defendant’s ability to cause
future harm are squarely within the CFTC’s core mission.”
Platform Promised
Safety, Delivered Losses
The CFTC’s
original lawsuit accused Ehrlich and Voyager of marketing their
platform as a “safe
haven” for digital assets while secretly transferring customer
funds to high-risk borrowers. The company promised returns as high as 12%
on certain cryptocurrencies stored on its platform.
To generate
those returns, Ehrlich and Voyager pooled customer assets and transferred over
$650 million to a hedge fund without proper due diligence,
according to regulators. When that borrower defaulted in June 2022,
Voyager faced immediate liquidity problems.
Ehrlich
continued publicly claiming customer assets remained safe even as the
company’s finances deteriorated. Voyager
filed for bankruptcy in July 2022, owing U.S. customers more than $1.7
billion.
For a time,
the collapsed crypto lending platform was
set to be acquired by Binance.US. However, just a few months after the
announcement, the
exchange withdrew from the $1 billion asset purchase deal.
Multiple Regulatory
Actions
The CFTC
settlement marks the latest penalty for Ehrlich, who has faced scrutiny
from multiple federal agencies. In June, he agreed to pay $2.8 million to
resolve Federal Trade Commission (FTC) charges over similar misleading
claims about deposit insurance and asset safety.
The
FTC accused Ehrlich of falsely telling customers their deposits carried FDIC
insurance protection, making them “as safe with us as at a
bank.” Most customer funds lacked such insurance coverage when
Voyager collapsed.
Voyager
customers have recovered roughly 35% of their cryptocurrency deposits
through the bankruptcy process. Recovery rates could increase depending on
ongoing litigation outcomes, including a dispute with failed exchange FTX
over asset transfers.
The case
reflects broader regulatory efforts to hold crypto executives accountable
following the industry’s dramatic downturn in 2022. Multiple digital
asset lending platforms collapsed during that period, including
Celsius Network and BlockFi, leaving customers with billions in
losses.
A federal
judge has ordered Stephen Ehrlich to pay $750,000 to defrauded customers
of Voyager Digital, the cryptocurrency lending platform he once led before
its spectacular collapse.
The consent
order, entered yesterday (Monday) in Manhattan federal court, settles
fraud charges the Commodity Futures Trading Commission (CFTC ) brought
against Ehrlich in October 2023. The former CEO must funnel the money
directly to Voyager customers through the company’s ongoing bankruptcy
liquidation.
Beyond the
financial penalty, Ehrlich faces a comprehensive three-year ban from
commodity trading activities. The restrictions block him from trading on
registered exchanges, managing accounts containing commodity interests, or
working for firms requiring CFTC registration.
The order
also permanently bars Ehrlich from violating anti-fraud provisions
of the Commodity Exchange Act. He neither admitted nor denied wrongdoing
as part of the settlement.
“This
resolution once again highlights the CFTC’s important role in the
digital asset space,” said Charles Marvine, acting chief of the Division
of Enforcement’s Retail Fraud and General Enforcement Task Force.
“Compensating victims and limiting a defendant’s ability to cause
future harm are squarely within the CFTC’s core mission.”
Platform Promised
Safety, Delivered Losses
The CFTC’s
original lawsuit accused Ehrlich and Voyager of marketing their
platform as a “safe
haven” for digital assets while secretly transferring customer
funds to high-risk borrowers. The company promised returns as high as 12%
on certain cryptocurrencies stored on its platform.
To generate
those returns, Ehrlich and Voyager pooled customer assets and transferred over
$650 million to a hedge fund without proper due diligence,
according to regulators. When that borrower defaulted in June 2022,
Voyager faced immediate liquidity problems.
Ehrlich
continued publicly claiming customer assets remained safe even as the
company’s finances deteriorated. Voyager
filed for bankruptcy in July 2022, owing U.S. customers more than $1.7
billion.
For a time,
the collapsed crypto lending platform was
set to be acquired by Binance.US. However, just a few months after the
announcement, the
exchange withdrew from the $1 billion asset purchase deal.
Multiple Regulatory
Actions
The CFTC
settlement marks the latest penalty for Ehrlich, who has faced scrutiny
from multiple federal agencies. In June, he agreed to pay $2.8 million to
resolve Federal Trade Commission (FTC) charges over similar misleading
claims about deposit insurance and asset safety.
The
FTC accused Ehrlich of falsely telling customers their deposits carried FDIC
insurance protection, making them “as safe with us as at a
bank.” Most customer funds lacked such insurance coverage when
Voyager collapsed.
Voyager
customers have recovered roughly 35% of their cryptocurrency deposits
through the bankruptcy process. Recovery rates could increase depending on
ongoing litigation outcomes, including a dispute with failed exchange FTX
over asset transfers.
The case
reflects broader regulatory efforts to hold crypto executives accountable
following the industry’s dramatic downturn in 2022. Multiple digital
asset lending platforms collapsed during that period, including
Celsius Network and BlockFi, leaving customers with billions in
losses.